Tenant wants to terminate the lease early.

Member since 2019 · 14 posts · 4 votes

Hello,

Looking for some guidance.

We just signed a 2-year lease term in July 2022. The tenant has lived at the property since 2019, and we have not had an issue. However, due to a recent family medical issue, the tenant informed us they would have to end the lease early. Our lease states the tenant may not end early and will be responsible for the full lease term. I understand that there are exceptions to this if the tenant is active military or if the housing does not meet safety standards. How do you guys deal with this kind of situation? I have the right to enforce the lease legally, but life happens, and I want to come to terms in a fair and friendly manner. Have you guys had experiences like this, and how have you dealt with it?

Thanks for your input!

Jun

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Colby Hanley

Rental Property Investor · Makawao, HI · Member since 2016 · 46 posts · 39 votes

I have had this happen a few times, I just ask that they allow me to advertise and show the unit if needed prior to them moving out. So far it has not been an issue and as the old tenant moves out the new one moves in the next day or two later. So little if no lost rent for me, and all tenants are happy. I would say the big thing is good communication between all parties, making sure everyone understands and is in agreement throughout the whole process.

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Bjorn AhlbladPro Member
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
3y
Generally our units rent very quickly like a revolving door quickly. We only ask that they pay the vacancy they created. I don't think that has exceeded a month-ever. We would never do a lease for more than 12 months.
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Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
3y
If this was a good tenant, I'd be inclined to do a good thing and let them go, as long as you can rent it out again of course....
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Colby Hanley
Rental Property Investor · Makawao, HI · Member since 2016 · 46 posts · 39 votes
3y
I have had this happen a few times, I just ask that they allow me to advertise and show the unit if needed prior to them moving out. So far it has not been an issue and as the old tenant moves out the new one moves in the next day or two later. So little if no lost rent for me, and all tenants are happy. I would say the big thing is good communication between all parties, making sure everyone understands and is in agreement throughout the whole process.
1 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
3y
I'd let them go early. They are responsible for the rent until you find a new tenant. Let them know that and ask them to have it is showroom condition to get it rented faster. Stack the showings to minimize the disruption to the current tenants. Put everything in writing and both of you sign it.
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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y
In this situation, it may be appropriate to renegotiate the lease agreement with the tenant. You could consider allowing the tenant to break the lease early in exchange for a fee or negotiating a new agreement that allows them to move out earlier while still meeting your obligations as a landlord.
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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3y
Quote from @Jun Hyuk Baek:

1. This should be a lesson to you. The majority of Tenants signing leases longer than one year will break that lease early. In my experience, it was closer to 80% so I stopped allowing leases longer than a year. Tenants will often ask to sign a longer lease hoping to lock in rent rates, jump ahead of other applicants, or get you to lower your screening standards. I recommend you stick with one-year leases. This is more manageable, it gives you the opportunity to adjust rent or change lease terms every year, and you'll have far fewer early terminations.
2. Consider building an early termination policy and including it in your lease. I let people terminate early and get a good Landlord reference by giving me 30 days notice, paying a "penalty" equal to one month of rent, paying rent and utilities through the full 30 days even if they depart early, and allowing me to market/show the rental during their final 30 days. About 80% of my tenants choose this option. I'm usually able to find a new tenant to occupy within two weeks of the old tenant departing, which means more money in my pocket.
3. You don't have an early termination option so you can give the tenant two options: (a) use #2 above, or (b) remain liable for rent and utilities until a new tenant is placed. If that takes one week, they only pay for one week of extra rent. If it takes two months, then they are liable for two months of rent.
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Jun Hyuk Baek
OP
Member since 2019 · 14 posts · 4 votes
3y
Quote from @Nathan Gesner:

Quote from @Jun Hyuk Baek:

1. This should be a lesson to you. The majority of Tenants signing leases longer than one year will break that lease early. In my experience, it was closer to 80% so I stopped allowing leases longer than a year. Tenants will often ask to sign a longer lease hoping to lock in rent rates, jump ahead of other applicants, or get you to lower your screening standards. I recommend you stick with one-year leases. This is more manageable, it gives you the opportunity to adjust rent or change lease terms every year, and you'll have far fewer early terminations.
2. Consider building an early termination policy and including it in your lease. I let people terminate early and get a good Landlord reference by giving me 30 days notice, paying a "penalty" equal to one month of rent, paying rent and utilities through the full 30 days even if they depart early, and allowing me to market/show the rental during their final 30 days. About 80% of my tenants choose this option. I'm usually able to find a new tenant to occupy within two weeks of the old tenant departing, which means more money in my pocket.
3. You don't have an early termination option so you can give the tenant two options: (a) use #2 above, or (b) remain liable for rent and utilities until a new tenant is placed. If that takes one week, they only pay for one week of extra rent. If it takes two months, then they are liable for two months of rent.

Nathan,
Thank you for providing me with the idea to create an early termination policy to be signed by every tenant in the beginning. I spoke to the tenant and listed out the terms, and the tenant has agreed. Your first point has definitely got me thinking about the other aspects of leases longer than one year. I used to think that it would be beneficial for me since I don't have to deal with turnover, but I also can't charge the market rent until that lease is over.
Good points!
Jun
1 Reply
Jun Hyuk Baek
OP
Member since 2019 · 14 posts · 4 votes
3y
Quote from @Eliott Elias:

In this situation, it may be appropriate to renegotiate the lease agreement with the tenant. You could consider allowing the tenant to break the lease early in exchange for a fee or negotiating a new agreement that allows them to move out earlier while still meeting your obligations as a landlord.

Eliott,
Thank you for your response! We have decided to have the tenant be liable for all rent and utilities until we can get a new tenant in. The tenant is willing to work with us to be flexible in showing the unit so that he can leave as early as possible.
Jun
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Jun Hyuk Baek
OP
Member since 2019 · 14 posts · 4 votes
3y
Quote from @Colby Hanley:

I have had this happen a few times, I just ask that they allow me to advertise and show the unit if needed prior to them moving out. So far it has not been an issue and as the old tenant moves out the new one moves in the next day or two later. So little if no lost rent for me, and all tenants are happy. I would say the big thing is good communication between all parties, making sure everyone understands and is in agreement throughout the whole process.

Colby,
Good communication is the key. I communicated our decision to the tenants in an honest way, and the tenant agreed to our terms in ending the lease early. Thank you for the recommendation!
Jun
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Jun Hyuk Baek
OP
Member since 2019 · 14 posts · 4 votes
3y
Quote from @Theresa Harris:

I'd let them go early. They are responsible for the rent until you find a new tenant. Let them know that and ask them to have it is showroom condition to get it rented faster. Stack the showings to minimize the disruption to the current tenants. Put everything in writing and both of you sign it.

Theresa,
Do you have a lawyer that helps you draw up amendments or these new contracts for both parties to sign? Do you have a property management software app that you use that enables you to create these binding documents? I did ask the tenant to have the room clean and showroom ready and be flexible in showing the property, as it will benefit both of us! Thanks for your response!
Jun
0 Reply
Jun Hyuk Baek
OP
Member since 2019 · 14 posts · 4 votes
3y
Quote from @Bjorn Ahlblad:

Generally our units rent very quickly like a revolving door quickly. We only ask that they pay the vacancy they created. I don't think that has exceeded a month-ever. We would never do a lease for more than 12 months.

Bjorn,
All the responses have got me thinking about leases longer than a year. Thank you for your response!
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
3y
I act like a human being.
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Jun Hyuk Baek
OP
Member since 2019 · 14 posts · 4 votes
3y
Quote from @Bruce Woodruff:

If this was a good tenant, I'd be inclined to do a good thing and let them go, as long as you can rent it out again of course....

Bruce,
The tenants were great, paid early, and never had any issues. Because of the experience, I was more inclined to come to more of an agreeable term with the tenants. It is in a high-demand area, but the only thing is that it is the slow part of the season for renting. We will see! Thank you for your response.
Jun
1 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
3y
Quote from @Jun Hyuk Baek:

Quote from @Theresa Harris:

I'd let them go early. They are responsible for the rent until you find a new tenant. Let them know that and ask them to have it is showroom condition to get it rented faster. Stack the showings to minimize the disruption to the current tenants. Put everything in writing and both of you sign it.

Theresa,
Do you have a lawyer that helps you draw up amendments or these new contracts for both parties to sign? Do you have a property management software app that you use that enables you to create these binding documents? I did ask the tenant to have the room clean and showroom ready and be flexible in showing the property, as it will benefit both of us! Thanks for your response!
Jun

I don't. For my rentals, I simply write it down and both of us sign it.
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
3y
@Jun Hyuk Baek you can't stop them from moving out, keep that in mind when negotiating.
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Jasmine H.
Rental Property Investor · Houston, TX · Member since 2014 · 139 posts · 140 votes
3y
@Jun Hyuk Baek we asked for an additional month of rent and let them go. They were divorcing and we didn't want to give them any more headache than they were already going through.
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